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March 16, 2011 - Phil Hodgen

East West Bank comments on IRS requirement for nonresident interest reporting

The IRS wants all U.S. banks to report the amount of interest earned on bank deposits owned by nonresident aliens.

This last came up 10 years ago, and was resoundingly shot down for obvious reasons. Leadership at the IRS has revived the idea. Cue the obligatory George Santayana reference.

Today I saw in Tax Notes Today a letter from Douglas Krause, General Counsel for East West Bank. They happen to be headquartered right here in my hometown of Pasadena, California.

Mr. Krause succinctly identifies what’s wrong with the idea. I’m a total fanboi.

CC:PA:LPD:PR (REG-146097-09), Room 5203,
Internal Revenue Service
PO Box 7604
Ben Franklin Station,
Washington, DC 20044

February 22, 2011

RE: IRS REG-146097-09

Dear Sir/Madam:

California based East West Bank is the largest bank in the nation targeted at serving the Asian American communities throughout the United States of America.

... continue reading
Foreign Business Activities in the USA
September 2, 2010 - Phil Hodgen

Estate tax sunset in 2010 applies to nonresidents

I received an email inquiry from a CPA friend about this, so I thought I would share it generally.

Question

Does the 2010 repeal of the estate tax apply to nonresidents of the United States?

Answer

Yes.  The repeal applies to residents and nonresidents alike.

Background

The estate tax disappeared on December 31, 2009.  It is designed to re-appear on January 1, 2011.  Tag that:  #politicalgames

The Tax Geek’s explanation

Section 2210(a) of the Internal Revenue Code says:

“Except as provided in subsection (b), this chapter shall not apply to estates of decedents dying after December 31, 2009.”

“This chapter” means Internal Revenue Code, Subtitle B, Chapter 11, which contains Sections 2001 through 2210.  ... continue reading

Foreign Business Activities in the USA Nonresidents with US Activities
July 21, 2010 - Phil Hodgen

Russian partner in U.S. partnership pays no U.S. income tax

Here is a recent Private Letter Ruling which parses the combined effect of U.S. tax law and the current income treaty between the United States and Russia.

A person in Russia is a partner in a U.S. partnership. It looks like a service partnership (accounting firm, law firm, etc.). The person did his/her work in Russia, not the United States. However, the partnership would distribute a share of partnership income to the person. Since it comes from a U.S. partnership, you’d think it is income that is taxable by the United States. Ordinarily that would be true.

However, the treaty between the United States and Russia is written in such a way that the person will collect partnership income from the United States without paying U.S.... continue reading

Foreign Business Activities in the USA Nonresidents with US Activities
July 19, 2010 - Phil Hodgen

FIRPTA withholding credit given even when the IRS didn’t get the money

In emailed advice released today on Tax Notes Today (2010 TNT 137-56 for you TNT fans) the IRS issued a rare written piece of information on FIRPTA withholding.

FIRPTA withholding

When a nonresident sells U.S. real estate, Uncle Sam wants to be sure to collect tax on the capital gain that the nonresident makes. This is achieved by forcing the buyer to withhold 10% of the purchase price. The buyer then gives that money to the IRS. The nonresident seller files a U.S. income tax return, and reports the capital gain and his/her/its actual tax liability. If the tax liability is less than the amount of tax withheld and remitted to the IRS, the nonresident seller gets a refund of the difference.... continue reading

Foreign Business Activities in the USA US Real Estate Investments
March 31, 2010 - Phil Hodgen

Overview from KPMG for inbound (to the US) business investment

Investment in the United States – A Guide for Foreign Companies [PDF] from KPMG/Canada.  If you need a satellite view of what it takes to expand your business to the United States, this is a decent start.

I’m writing an article for Business Law News on the topic.  Will be delivered to the editors today.  Aimed at business lawyers who are not tax specialists, let alone international tax specialists.  Mine is much shorter and much more modest in scope:  no “boil the ocean” for me. 🙂... continue reading

Foreign Business Activities in the USA Speeches, Publications, and Events